Letter To Shareholders - Mitac

1. Financial structure
(1) Debt ratio = Total liabilities / Total assets
(2) Ratio of long-term funds to fixed assets= (Net shareholders’ equity + Long-term debts) / Net
fixed assets
2. Solvency
(1) Current ratio = Current assets / Current liabilities
(2) Quick ratio = (Current assets – Inventory – Prepaid expenses) / Current liabilities
(3) Time-Interest-earned ratio = Income before income tax and interest expense / Interest
expense
3. Operational capability
(1) A/R turnover (times) = Net sales / Average receivables balance (including accounts
receivable and notes receivable from operations) in various terms
(2) A/R turnover days= 365 / A/R turnover (times)
(3) Inventory turnover (times) = Cost of goods sold / Average inventory
(4) AP turnover (times) = Cost of goods sold / Average accounts payable balance (including
accounts payable and notes payable from operations) in various terms
(5) Inventory turnover days = 365 / Inventory turnover (times)
(6) Fixed assets turnover (times) = Net sales / Net fixed assets
(7) Total asset turnover (times) = Net sales / Total assets
4. Profitability
(1) Return on assets ={Profit after tax +〔Interest expenses x (1 – (tax rate)〕}/Average of
total assets
(2) Return on shareholders’ equity = Profit after tax / Average net equity
(3) Net income ratio = Profit after tax / Net sales
(4) EPS = (Profit after tax – Dividend from preferred stock) / Weighted average of outstanding
shares
5. Cash Flow
(1) Cash flow ratio = Cash flow from operations / Current liabilities
(2) Cash flow adequacy ratio = Most recent five-year cash flow from operations /
Most recent five-year (sum of capital expenditures, increases in inventory, cash dividends)
(3) Cash reinvestment ratio = (Cash flow from operating activities – Cash dividend) / (Gross
fixed assets + Long-term investment + other assets + Working capital)
6. Leverage
(1) Operating leverage = (Net revenue – Variable cost of goods sold and operating expenses) /
Operating income
(2) Financial leverage = Operating income / (Operating income – Interest expense)
90